Warren Buffett pictured before the Berkshire Hathaway Annual Shareholder’s Meeting in Omaha, NE.
David A. Grogan | CNBC
Berkshire Hathaway Energy has reached an agreement to acquire a 50% stake in the Cove Point liquefied natural gas facility for $3.3 billion in cash.
Warren Buffett’s prominent energy and utility division purchased the stake from Dominion Energy and will now possess a 75% limited partnership stake in Cove Point LNG located in Lusby, Maryland. The remaining 25% is held by a subsidiary of Brookfield Infrastructure Partners.
Though the deal, announced on Monday, may not be large in size for Berkshire, it reflects the conglomerate’s expanding investment in energy infrastructure and its control over one of the few functioning LNG export facilities in the United States.
“It aligns with their long-term focus on the increasing value of energy resources and their ownership of one of the limited US LNG exporters,” explained Bill Stone, Chief Investment Officer at Glenview Trust and a Berkshire shareholder.
The Cove Point LNG Terminal has a storage capacity of 14.6 billion cubic feet and a daily send-out capacity of 1.8 billion cubic feet. The company has a long-term contract with Sumitomo Corp., a Japanese trading company in which Buffett also has investments.
In 2020, Berkshire Hathaway initially acquired a stake in Dominion’s gas pipeline and storage assets for $4 billion. Greg Abel, Chairman of Berkshire Hathaway Energy and former CEO, stated in a previous CNBC interview that the 2020 deal was facilitated by his strong relationship with former Dominion CEO Tom Farrell.
Abel now serves as Vice Chairman for non-insurance operations at Berkshire Hathaway and is viewed as the successor to 92-year-old Warren Buffett. Buffett has highlighted Abel’s assumption of many responsibilities within the conglomerate.
In 2022, Berkshire proposed investing nearly $4 billion to enhance wind and solar power generation in Iowa. Simultaneously, the conglomerate has significantly increased its exposure to two traditional energy companies, Occidental Petroleum and Chevron.
“Buffett has long been fond of pipelines due to their consistent revenue streams instead of pure commodity exposure, and this acquisition likely aligns with that strategy,” stated Stone. “While natural gas prices have declined, most of these exporters operate under long-term take or pay contracts.”
Natural gas futures have dropped over 40% this year to $2.709 per million British thermal units.
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